New Intermediate SPV Mode in the UAE

On September 19, 2016, a new mode for creating Intermediate Special Purpose Vehicle has been permitted by the Dubai International Financial Centre.

New versions of the DIFC Companies Guidelines, which are currently under consideration, are expected to regulate and clarify the Intermediate SPV mode in Dubai. However, the Intermediate SPV mode was immediately enacted by the DIFC with certain provisions and rules either being dismissed or altered.

The main reason that induced the establishment of the Intermediate SPV is the absence of a simplified and cost-effective special purpose vehicle structure in the UAE that would be viable and competitive among structures presently existing in the world.

It is necessary to know, however, that there is a restriction – the Intermediate SPV applies only to those entities that are already registered by the DIFC.

The word “Intermediate” in this case is used to indicate that it is neither a primary holding entity nor an operating one.

Advantages

One of the main advantages of the mode is the facilitated and more economical registration process compared to a typical holding company. There is a shorter list of requirements and less detailed business plan. In addition, if more than one intermediate SPV is used, a single business plan will be sufficient. However, you will need individual application forms for each entity.

The costs of registration are also significantly lower than in a case of a typical holding company.

Another important advantage is related to the fact that the DIFC allows the Intermediate SPV to use the same address. This way you won’t need an extra office, which also reduces the costs.

Eligibility Criteria

“Qualifying Applicant” is defined as the entity which is a holding investment company and has already been registered by the DIFC. Secondly, it has to conform to the collective investment system of the DIFC. While the collective investment system can be created outside the DIFC in Dubai, it has to be managed by the Dubai Financial Services Authority (DFSA).

Conclusion

Although there is a restriction and the Intermediate SPV mode is available only to applicants who are already registered within the DIFC, it is still attractive to many entities. The simplified procedure, facilitating business environment and economic practicality make it appealing for doing business.